Chaz Bono Gives Weight Loss Drugs Celebrity Appeal — Arena Pharmaceuticals Inc. (NASDAQ:ARNA) and VIVUS Inc. (NASDAQ:VVUS)

http://marketplayground.com/2013/07/19/chaz-bono-gives-weight-loss-drugs-celebrity-appeal-arena-pharmaceuticals-inc-nasdaqarna-and-vivus-inc-nasdaqvvus/

Lorcaserin CRL interpretation

This is one MD's interpretation of Lorcaserin's Complete Response Letter from the FDA.

What do the CRL requirements for Lorcaserin mean in practice?



1. Non-clinical issues

a. “Detailed accounting of all microscopic pathology slides prepared from FEMALE rats that contributed to the mammary tumor incidence data in each update to the FDA and the final study report”

i. Requirement: account for all slides done on those tissue – exactly what it says – an accounting issue.

ii. In total, 65+65+75 = 205 FEMALE rats were given lorcaserin along with 65 untreated control FEMALE rats - see Table 6 in the section: “Genotoxicity and Carcinogenicity Assessment For Lorcaserin” (Mammary Tumors).

iii. This task should not take more than 4 months, leading to a revised report (if needed)

b. Independent pathologists/group of pathologists to re-adjudicate all mammary and lung (unclear why lung) tissues from all FEMALE rats (205)

i. I understand this to mean that since a discrepancy was found between the week-96 tumor incidences at all doses – the reason for the accounting check – these pathologists are to re-read the histological slides and give a final decision on what the true incidences are, so as to settle the discrepancy.

1. This procedure should not take more than 4 months

2. The response does not require a new study, according to advice we have received from a non-clinical safety assessment toxicologist.

ii. During the Arena Conference Call on October 25, 2010, the reason for the discrepancy was provided: The preliminary slides were reviewed on a periodic basis by one pathologist and sent to the FDA prior to the final submission. However, at the end of the study, three independent pathologists performed a peer review of the data and submitted their results, the ones that were included in the final NDA.

iii. The discrepancy between the assessments made by the different pathologists was mentioned by in the section: “Genotoxicity and Carcinogenicity Assessment For Lorcaserin” (5th paragraph; Mammary Tumors), where Dr. Alavi (FDA’s nonclinical pharmacology/toxicity presenter) makes the following statement:

“In subsequent updates and in the final study report, the incidence of adenocarcinoma in the MD and HD females was lower than that reported at week 96 (Table 7a). The incidence of adenocarcinoma increased in the controls and stayed consistent in the low dose group over the same period. The incidence of fibroadenoma increased in all dose groups from week 96 to the final study report, though the numbers notably varied in the mid- and high dose groups (Table 7b). It appears that some of the decrease in the number of adenocarcinoma after week 96 was accompanied by an increase in fibroadenoma, potentially a consequence of the sponsor/CRO reclassifying the observed tumor types.”

1. The question that begs an answer here is: Why did Dr. Alavi not know that the slides had been reviewed by a single pathologist during the study and then by three independent pathologists at the end of the study?

2. It is well known that inter-observer variation can occur in assessments of this nature. This should have been taken into account, rather than implying that the sponsor/CRO had acted improperly in respect of the discrepancy in the final numbers



c. Demonstrate that the apparent increase in aggressiveness of adenocarcinoma in rats administered lorcaserin is REASONABLY (not conclusively) irrelevant to human risk assessment.

i. Here they are asking: With regard to the re-adjudicated results, a statistical analysis must again be carried out on the incidence of fibroadenomas and adenocarcinomas

ii. This is not a new study, but a re-assessment of the existing one. Unless the accounting yields a new surprise, then a further study will not be necessary.

iii. The results will most likely be the same. If they are the same, then Arena needs to demonstrate that the adenocarcinomas seen at the very high and toxic Lorcaserin doses, and the statistically significant increases in fibroadenomas, do not portend a risk to humans. The following information is relevant here:

The incidence of malignant adenocarcinoma tumors identified in the 10 mg/kg/day female group was no different to the normally-occurring incidence of these tumors identified in the untreated control group. Furthermore, in the 30 mg/kg/day female group, a dose 24-fold greater than the anticipated human therapeutic dose, the incidence of malignant mammary tumors was no greater than the normally-occurring malignant mammary tumor incidence reported in the untreated control female rats. Only at 100 mg/kg/day was there a statistically significant increase in adenocarcinoma incidence, but this lorcaserin dose is 82-fold that intended for human use. (Note that if Arena decides to fall into the FDA ‘mechanism of action (MOA) involves prolactin’ “trap”, they will fail and spend an eternity attempting to find the answer. They should not attempt to open Pandora’s box. There are numerous drugs on the market today for which the MOA for pathology is not understood).

Although the fibroadenoma incidence in the rats was found to be statistically significant at all doses, and the practice of combining benign tumors with malignant tumors is commonly done when the cell types are the same, this does not pose a human risk for the following reasons:

1. Fibroadenoma and adenocarcinoma arise from cell types with different histogenesis. Adenocarcinomas are classified under the epithelial histotype, fibroadenomas under the epithelial-stromal histotype (Russo, Gusterson, et al. 1990 and Russo, Russo, et al. 1989).

2. Benign mammary fibroadenomas can only be transformed to malignant mammary carcinosarcoma and never to mammary adenocarcinoma (Russo, Gusterson, et al. 1990 and Russo, Russo, et al. 1989). These are distinctly different tumors.

3. The rat model of tumorigensis closely mimics human breast tumor development.

4. Fibroadenomas rarely progress to adenocarcinoma in the rat.

5. Fatalities from benign fibroadenomas do not translate as a risk to humans.

6. Fibroadenomas rarely progress to adenocarcinoma in the human female and are relatively common (London, et al. 1992).



d. Provide ADDITIONAL DATA/INFORMATION regarding the distribution of lorcaserin to the CNS in animals and human subjects that would clarify or provide a better estimate of astrocytoma exposure margins.

i. Since brain partitioning – brain-to-plasma (BPD) ratio - was not determined in humans, the FDA is concerned that estimates of safety margins based on extrapolation from monkey brain-to-plasma ratios are not reliable. This assumption was made by Dr. Alavi as outlined below:

ii. The problem here is as follows:

1. The brain-to-plasma ratio for lorcaserin is not known in humans since it is a novel new drug that has not yet been studied in this way. But we do know:

a. The brain-to-plasma ratio for lorcaserin for mice is 25 times higher in the brain vs. plasma (of note, there were no brain tumors in mice including the high dose group).

b. The brain-to-plasma ratio for lorcaserin for rats is 29 times higher in the brain vs. plasma.

c. The brain-to-plasma ratio for lorcaserin for monkeys is 10 times higher in the brain vs. plasma.

2. Regarding the reliability of extrapolating monkey brain-to-plasma ratios to human subjects:



Dr. Alavi’s assumption is: "Brain partitioning in human subjects was not determined. Thus, estimating safety margins based on assumptions of partitioning in human subjects is not entirely reliable. Assuming that the monkey best models human partitioning, the estimated safety margin to a non-tumorigenic dose in rats may range from 11x to 17x, with tumors associated with brain exposures that are 40x to 59x higher than clinical exposure. More conservatively, safety margins based on plasma drug levels, which is known for rats and humans, yields a safety margin to the non-tumorigenic dose in rats of 5x, with brain tumors occurring at doses of lorcaserin 17-fold higher than the clinical dose” from the section in the FDA briefing document: from the section “Genotoxicity and Carcinogenicity Assessment For Lorcaserin” (Abstract).



iii. The solution: An extensive review on this very issue (Shen, Artru and Adkison 2004) contradicts Dr. Alavi's opinion that estimating safety margins based on assumptions of partitioning in human subjects is not entirely reliable. Referring to the monkey model, the authors state - “In the second part of our analysis, we examined the issue of whether CSF penetration studies in animals are predictive of human data. We obtained animal and human CSF data on 27 drugs, including 13 antiepileptics, 1 psychotropic drug, 5 anesthetics or analgesics, 5 antibiotics, 1 antiretroviral, and 2 anticancer drugs, and across six animal species, including rats, dogs, rabbits, cats, guinea pigs and monkeys. As can be seen in Fig. 9, there is a reasonably good correlation for the majority of drugs in this survey."

1. In the same article the authors conclude: "Despite the complexity of CSF physiology and pharmacokinetics, CSF penetration studies in animals remain a practical option for the assessment of CNS drug delivery in early preclinical drug development"

a. Monkey brain partition studies can, therefore, be used with reasonable assurance for estimating a drug's margin of safety in the human brain.

iv. The brain-to-plasma ratio for lorcaserin for rats is 29 times higher in the brain vs. plasma and the for monkeys it is 10 times higher in the brain vs. plasma

1. The interpretation:

a. This means that there is 29x more lorcaserin in the rat brain, so the dose given to rats at the LD, MD, and HD will be much higher in the CSF and therefore more toxic.

b. In practice, this means that at any given dose, the higher the brain exposure in rats, the higher will be the estimated brain exposure in humans - From the Tables 13 and 14 in the FDA briefing in the section: “Genotoxicity and Carcinogenicity Assessment For Lorcaserin (Brain Astrocytoma)”

i. Brain exposure in the rat at 30mg/kg (brain tumors present in the rat) = 405-591 mcgm/ml.

ii. Using the brain-to-plasma ration of 10x in the monkeys (multiple the brain exposure in rats by 10).

iii. Brain exposure in humans at the 30 mg/kg (brain tumors present in the rat) = 40x-59x multiple of the clinical dose (10mg bid (twice a day).

iv. Therefore, from the Table, we can see that the margin of safety is at 11x-17x multiple of the clinical dose, which would satisfy the concern brought up in the CRL.

v. The 17x dose is when the tumors first appeared (the 30 mg/kg dose). Hence the tumorigenic dose for humans, when discussing brain/plasma ratios, would then be 40-59x multiple of the clinic dose - far above the 25-fold limit dose in the FDA guidelines.

vi. So from the data on the male rats the risk of developing statistically nonsignificant astrocytomas in the human, assuming that this can be transferred to human risk, would only arise at 40-59 x multiple of the clinical dose. The margin of safety dose would be 17x multiple and perhaps anywhere up to 39x multiple, although the precise value would have to be determined at incremental increases in the dose of lorcaserin (which is not necessary).

vii. However because Dr. Alavi used plasma levels, he concluded that the nontumorigenic dose (level where there are no tumors) gave a margin of safety at only a 5x multiple of the clinical dose. Our analysis suggests that he erred in doing this.



v. Astrocytoma was only statistically significant in male rats in the high dose group, but none of these tumors was found in the female rats.

1. The solution:

a. Arena must supply all MBTD and brain-to-plasma ratio data to FDA in a simple, easy-to-read format.

b. Given adequate resources, this administrative task should not take long.



2. Clinical issues

a. Results on the BLOOM-DM trial. There is nothing more to say on this point.



3. Labeling requirement.

a. Schedule IV: This is not a significant issue. Schedule IV does not necessarily preclude long-term use, although FDA may add restrictions to that effect.

b. They did leave the door open for removal of this label.

c. Arena must discuss with FDA any nonclinical studies conducted to address abuse concerns regarding the long-term use of lorcaserin.



In conclusion, no new studies need to be done except perhaps brain partitioning studies on humans. However, this may not be necessary if the information provided above is correct. If such studies were performed, they would not be long-term experiments and could be completed in a relatively short period, and they may not even need to be carried out under GLP conditions. However, I sense Arena already has all the data required to address this particular concern. Every other aspect of the CRL involves a REVIEW of existing information, nothing else. If everything is submitted in a timely manner, the estimated timeframe for the completion of these reviews should be less than 6 months.



REFERENCES CITED

London, S.J., Connolly J.L., S.J. Schnitt, and G.A. Colditz. "A Prospective Study of Benign Breast Disease and the Risk of Breast Cancer." JAMA 267 (1992): 941-4.

Russo, Jose, Barry A. Gusterson, Adrianne E. Rogers, Irma H. Russo, Seft R. Wellings, and Matthew J. Van Zwietien. "Biology of Disease: Comparative Study of Human and Rat Mammary Tumorigenesis." Laboratory Investigation, 1990: 267.

Russo, Jose, Irma H. Russo, Matthew J. van Zwieten, Adrianne E. Rogers, and Barry A. Gusterson. "Integument and Mammary Glands of Laboratory Animals." In Classification of Neoplastic and Non-neoplastic Lesions of the Rat Mammary Gland, edited by T.C. Uones, U. Mohr and R.D. Hunt, 275-304. Berlin:Springer-Verlag, 1989.

Shen, Danny D., Alan A. Artru, and Kimberly A. Adkison. "Principles and Applicability of CSF Sampling for the Assessment of CNS Drug Delivery and Pharmacodynamics." Advanced Drug Delivery Reviews, 2004: 1825-1857.



Daniel P. Lopez, M.D., F.A.C.O.G.

Diplomate American Board of Obstetrics and Gynecology

BORG Member

ARNA investors fight back

http://www.signonsandiego.com/news/2010/oct/09/arena-investors-fight-back-against-fda/

Piper Jaffray Says Arena Pharmaceuticals (ARNA) Sell-Off is an "Overreaction"

Piper Jaffray reiterates their Overweight rating on shares of ARNA with a price target of $10.

http://www.streetinsider.com/Analyst+Comments/Piper+Jaffray+Says+Arena+Pharmaceuticals+%28ARNA%29+Sell-Off+is+an+%22Overreaction%22/5967972.html

Handicapping Lorcaserin's advisory committee review

This is my attempt to handicap the voting by members of Lorcaserin's advisory committee, given they are the same panel as Meridia's advisory committee.

ENDOCRINOLOGIC AND METABOLIC DRUGS ADVISORY COMMITTEE MEMBERS (Voting)

Eric I. Felner, M.D.
Associate Professor of Pediatrics
Director of Diabetes and Endocrinology
Hughes Spalding Children's Hospital
Emory University School of Medicine
Atlanta, Georgia
* Yes on Lorqess, due to lower HbA1c glucose levels

Lamont G. Weide M.D., Ph.D., F.A.C.E.
Chief, Diabetes & Endocrinology
Professor, Internal Medicine
University of Missouri - Kansas City
Truman Medical Centers
Diabetes Center
Kansas City, Missouri
* Voted No on Qnexa, wanted 2 year data
* Yes on Lorqess, due to 2 year echo data, and lower HbA1c glucose levels

Allison B. Goldfine, M.D. Associate Professor
Harvard Medical School Section Head of Clinical Research
Joslin Diabetes
Boston, Massachusetts
* Voted Yes on Qnexa
* Strong Yes on Lorqess, due to better safety profile, and lower HbA1c glucose levels

Abraham Thomas, M.D., M.P.H.
Acting Chair Division Head
Endocrinology, Diabetes, Bone, and Mineral Disorders
Henry Ford Hospital
Whitehouse Chair of Endocrinology
Detroit, Michigan
* Voted No on Qnexa
* No on Lorqess, didn't seem to believe in drug therapeutics for obesity

CARDIOVASCULAR AND RENAL DRUG ADVISORY COMMITTEE MEMBER (Voting)

Sanjay Kaul., M.D.
Director, Fellowship Training Program in Cardiovascular Diseases
Cedars-Sinai Heart Institute
Professor, David Geffen School of Medicine at UCLA
Division of Cardiology
Cedar Sinai Medical Center
Los Angeles, California
* Voted Yes on Qnexa
* Strong Yes on Lorqess, due to better safety profile and 2-year echo data

CENTER FOR DRUG EVALUATION AND RESEARCH TEMPORARY MEMBERS (Voting)

Melanie Coffin
Patient Representative Rockville, Maryland
* Voted Yes on Qnexa
* Strong Yes on Lorqess, due to better safety profile

Jessica W. Henderson, Ph.D.
Acting Consumer Representative
Professor of Community Health Education Division of Health and Physical Education
Western Oregon University
Monmouth, Oregon
* Voted Yes on Qnexa
* Strong Yes on Lorqess, due to better safety profile.

John M. Flack, M.D., M.P.H., F.A.H.A., F.A.C.P.
Professor of Medicine & Physiology
Chair, Department of Internal Medicine
Chief, Division of Translational Research & Clinical Epidemiology
Wayne State University School of Medicine
Detroit, Michigan
* Yes on Lorqess, due to 2-year echo data, and lower HbA1c glucose levels. Also, half-life for Lorqess is faster and metabolized in the kidneys, not the liver.

William R. Hiatt, M.D., F.A.C.P.
University of Colorado Denver, School of Medicine
Section of Vascular Medicine
Divisions of Geriatric Medicine and Cardiology
President, Colorado Prevention Center
Aurora, Colorado
* Yes on Lorqess, due to 2-year echo data.

Jacqueline S. Gardner, Ph.D., M.P.H.
Professor Emeritus
Department of Pharmacy
University of Washington
Seattle, Washington
* Strong Yes on Lorqess, due to no teratogenicity or unwanted pregnancy concerns (see Qnexa). Formulary journal endorses Lorqess as a safe, effective drug that can be taken for longer than 12 weeks, unlike phentermine.

Jodi B. Segal, M.D., M.P.H.
Associate Professor of Medicine
Health Policy and Management, and Epidemiology
Johns Hopkins University
Baltimore, Maryland
* Yes on Lorqess, due to better safety profile, and lower HbA1c glucose levels

Peter A. Gross, M.D.
Executive Vice President & Chief Medical Officer
Hackensack University Medical Center
Hackensack, New Jersey
* Don't Know

David D. Waters, M.D. Emeritus Professor
Division of Cardiology
San Francisco General Hospital University of California
San Francisco, California
* Yes on Lorcaserin, due to 2 years of echo data

REGULAR GOVERNMENT EMPLOYEES (Voting)

Dennis O. Dixon, Ph.D. Mathematical Statistician
Biostatistics Research Branch
National Institute of Allergy and Infectious Diseases (NIAID)
National Institutes of Health (NIH)
Bethesda, Maryland
* Strong Yes on Lorcaserin, as clinical trials had the most patients and benefits are statistically significant.

Katherine M. Flegal, Ph.D.
Senior Research Scientist
Distinguished Consultant
National Center for Health Statistics
Centers for Disease Control and Prevention
Hyattsville, Maryland
* Voted No on Qnexa
* Yes on Lorqess, due to 2-year echo data and clinical trials had the most patients and benefits are statistically significant

Edward W. Gregg, Ph.D.
Chief, Epidemiology and Statistics Branch
Division of Diabetes Translation
Centers for Disease Control and Prevention
Atlanta, Georgia
* Don't Know
* Could be a yes for Lorqess as clinical trials had the most patients and benefits are statistically significant.

Michael A. Proschan, Ph.D.
Mathematical Statistician
Biostatistics Research Branch
NIAID, NIH
Bethesda, Maryland
* Voted No on Qnexa
* Strong Yes on Lorcaserin, as clinical trials had the most patients and benefits are statistically significant

ENDOCRINOLOGIC AND METABOLIC DRUGS ADVISORY COMMITTEE MEMBER
(Non-Voting)

Enrico P. Veltri, M.D.
Industry Representative
Pharmaceutical Industry Consultant
Princeton, New Jersey

FDA PARTICIPANTS (Non-Voting)

Curtis J. Rosebraugh, M.D., M.P.H.
Director
Office of Drug Evaluation (ODE) II
Office of New Drugs (OND)
Center for Drug Evaluation and Research (CDER)
Food and Drug Administration (FDA)

Mary H. Parks, M.D.
Director
Division of Metabolism and Endocrinology Products (DMEP),ODE II
OND, CDER, FDA

Eric Colman, M.D.
Deputy Director
DMEP, ODE II, OND
CDER, FDA

Monique Falconer, M.D., M.S.
Clinical Reviewer
DMEP, ODE II, OND
CDER, FDA

David Hoberman, Ph.D.
Mathematical Statistician
Division of Biometrics II
Office of Biometrics
Office of Translational Sciences
CDER, FDA

My best guess tally is 14 Yes, 1 No, and 2 Don't Know. Seven of the Yes votes are a Strong Yes. Even though cardiac valvulopathy has been ruled out based on 2 years of echo data, I did not include all of the cardiovascular voting members as a Strong Yes.

Worst-case scenario is 9 Yes, 8 No. ARNA shares probably drop to $3 - $4 in this scenario.

Best-case scenario is 16 Yes, 1 No. ARNA shares could soar to $15 - $20 in this scenario.

See disclaimers in the side bar. This is not financial advise, and any price or directional targets are my opinion only. Perform your own due diligence.

Disclosure: long ARNA shares, short January 2011 puts, long October calls and short October puts (bullish risk reversal spread, or synthetic long stock split strikes position).

September 15-16, 2010 Meeting of the Endocrinologic and Metabolic Drugs Advisory Committee

FDA and Sponsor briefing documents for Abbott's Meridia and Arena's Lorcaserin advisory committee reviews will be posted here.

http://www.fda.gov/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/EndocrinologicandMetabolicDrugsAdvisoryCommittee/ucm191113.htm

Why the Street misses sometimes

It is also why individual investors can outperform the professional investment community, given a huge amount of due diligence, personal conviction and intestinal fortitude.

http://klljinvestments.blogspot.com/p/arna-valuation.html

See disclaimers in the side bar.

Disclosure: long ARNA shares, short ARNA put options.

thestreet.com is bearish on ARNA--again

Adam Feuerstein, thestreet.com's biotech analyst is once again bearish on shares of Arena Pharmaceuticals. He was also bearish on shares of DNDN and HGSI before they appreciated more than 10-fold from their lows. And he was bullish on VVUS before the advisory committee rejected anti-obesity drug Qnexa, tanking shares more than 60% the next day.

http://www.thestreet.com/story/10829837/arena-pharma-deja-vu-danger.html

In other words, his track record for predicting winners and losers is spotty at best.

Meanwhile, the editors of the New England Journal of Medicine and the Formulary journal, the most respected peer-reviewed medical journal and peer-reviewed drug management journal, respectively, were overwhelmingly positive of ARNA's Lorcaserin benefits for obese and morbidly overweight patients, balanced against a clean safety profile.

Mr. Feuerstein is a "Senior Columnist" specializing in biotech and works for thestreet.com, a public company being investigated by the SEC for accounting irregularities.

http://www.zerohedge.com/article/jim-cramers-thestreet-being-investigated-sec

thestreet.com is also a defendant in a lawsuit seeking $250 million in damages for business defamation, product disparagement, and injurious falsehood.

http://wallstreetpit.com/22485-generex-gnbt-launches-250mln-lawsuit-against-thestreet-com-tsmc

For what it's worth, Mr. Feuerstein has a bachelor's degree in political science from Emory University.

See disclaimers in the side bar.

Disclosure: long shares of ARNA.

Arena Pharmaceuticals receives $60 million from Deerfield

Shares in ARNA will take a hit temporarily this morning from the dilution. But longer-term, this financing will be beneficial for the following reasons:

1) it reduces the debt load by $30 million
2) it delays one payment for 2 years
3) it adds $30 million of cash to ARNA's coffers
4) it strengthens Deerfield's equity position, which is bullish as Deerfield has insider knowledge into Lorcaserin's New Drug Application (NDA). Deerfield is all in.

http://www.prnewswire.com/news-releases/arena-pharmaceuticals-to-receive-60-million-from-deerfield-management-100100874.html

See disclaimers in the side bar.

Disclosure: long ARNA shares, short January put options.

ARNA Q2 earnings report

http://finance.yahoo.com/news/Arena-Pharmaceuticals-prnews-3737388002.html?x=0&.v=1

Arena Pharmaceuticals, Inc. (Nasdaq:ARNA - News) today reported financial results for the second quarter ended June 30, 2010, and recent developments, including the successful Pre-Approval Inspection, or PAI, of the company's Swiss drug product manufacturing facility by the US Food and Drug Administration, or FDA.

"We have recently achieved a number of important milestones, including the establishment of an agreement with Eisai for the commercialization of lorcaserin in the US, the successful completion of the FDA's pre-approval inspection of our Swiss manufacturing facility and the publication of our BLOOM trial results in the New England Journal of Medicine," stated Jack Lief, Arena's President and Chief Executive Officer. "We are continuing to execute on our plans for lorcaserin as we prepare for the September FDA advisory committee meeting and potential regulatory approval."

See disclaimers in the side bar.

Disclosure: long ARNA sharews.

Lorcaserin article in the Formulary Journal

Along with a peer-reviewed report and editorial in the well-respected New England Journal of Medicine, another positive article about Lorcaserin has been published in the Formulary Journal, a peer-reviewed drug management journal for managed-care and hospital decision-makers.

http://formularyjournal.modernmedicine.com/formulary/Modern+Medicine+Now/Lorcaserin-A-novel-selective-5-HT2C-receptor-agoni/ArticleStandard/Article/detail/673923

JPMorgan downgrades ARNA

Two weeks ago, JPMorgan upgraded shares of ARNA to Overweight. This morning, JPMorgan downgrades ARNA to Neutral, with a price target of $6. Sure, shares have appreciated 80% since the upgrade, but this appears suspicious. Could it be they have clients that need to cover their shorts--or longs that missed the run up and would like to enter at a lower price? Not that I am suggesting there is manipulation at work--since it's illegal, but the timing suggests opportunism.

http://www.businessweek.com/news/2010-08-02/boyd-charles-river-humana-mosaic-penske-u-s-equity-movers.html

http://www.canadianbusiness.com/markets/market_news/article.jsp?content=D9HBFN6O0

See disclaimers in the side bar.

Disclosure: long ARNA shares, added to my position this morning.

Thanks for the gift, JPMorgan and shorts.

CNBC's Jim Cramer says ARNA is a Buy

But he also tells longs who bought ARNA at lower levels to take profits and sell half their positions. Thanks but no thanks, I'm not selling any of my shares at these levels to his short cronies who are upside down and need to cover. There is nothing wrong with taking some profits off the table, but with two big pivotal events pending (independent Advisory Committee vote and PDUFA review), I'm staying long and strong. Every investor has different objectives and time lines, so decide for yourself, and don't be swayed by media "pundits" who may not have your best interests at heart. Good luck to all longs.

http://www.cnbc.com/id/38487197

Arena Pharmaceuticals [ARNA 7.95 0.97 (+13.9%) ]: ARNA is a buy, Cramer said. Thought the stock has enjoyed a big run, so investors who already have held the stock should have been taking some profits.

See disclaimers in the side bar.

Disclosure: long ARNA shares.

Rodman and Renshaw analyst downgrades ARNA

Elemer Piros, analyst for Rodman & Renshaw, downgraded shares of Arena Pharmaceuticals (symbol "ARNA") a few weeks ago.

His comments:

http://www.bioworld.com/servlet/com.accumedia.web.Dispatcher?next=bioWorldHeadlines_article&forceid=55188

Yet Piros argued that lorcaserin's "weak efficacy" will change the overall risk/benefit discussion when the panel convenes again. Although the drug met the FDA's requirement for a doubling in the percent of patients who lost 5 percent of their weight, it has fallen short on the other efficacy measure, showing 3.6 percent placebo-adjusted weight loss.

I guess he was unaware of the either/or efficacy clause, according to the FDA 2007 Guidance on Weight Management drugs.

http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/ucm071612.pdf

c. Efficacy benchmarks

In general, a product can be considered effective for weight management if after 1 year of treatment either of the following occurs:

• The difference in mean weight loss between the active-product and placebo-treated groups is at least 5 percent and the difference is statistically significant

• The proportion of subjects who lose greater than or equal to 5 percent of baseline body weight in the active-product group is at least 35 percent, is approximately double the proportion in the placebo-treated group, and the difference between groups is statistically significant

Regarding the lucrative Lorcaserin marketing agreement with Eisai, ARNA receives some of the highest revenue splits in the industry. Yet, Piros was unimpressed:

http://www.bioworld.com/servlet/com.accumedia.web.Dispatcher?next=bioWorldHeadlines_article&forceid=55010

Elemer Piros, analyst with Rodman & Renshaw, dubbed the deal "meek" and "fairly modest," noting that the arrangement is "highly back-end loaded, and leaves a lot of lorcaserin commercial risk with Arena shareholders."

Note: at the time of the downgrade, shares of ARNA were trading under $3. A month later, shares are gapping up above $6 in anticipation of a positive advisory committee review on September 16, and full FDA review (PDUFA) on October 22. Piros' price target for ARNA shares is $1.

Rodman & Renshaw is an investment bank specializing in the life science/healthcare industries, among others. ARNA was looking to raise capital prior to its partnership agreement with Eisai. ARNA ended up choosing an alternate route in their latest PIPE financial deal with Deerfield.

See disclaimers in the side bar. No causal relationship implied.

Disclosure: long shares of ARNA.

The anatomy of a bear raid

"Expect Massive BEAR RAID this afternoon @ 12 30 pm central last trade 24 suggest you sell short into strength MASSIVE BEAR RAID coming.. TODAY"

- monthaphumchareon, April 28, 2009 around 11 a.m., the same day Dendreon CEO Mitch Gold was presenting Phase III clinical trial results at the American Urological Association for Provenge, an advanced prostate cancer immunotherapy approved by the FDA a year later, April 29, 2010.

"He was roundly mocked until the prediction turned out to be amazingly accurate. The stock plunged from 25 to 8 in 75 seconds. And later that very day, the company presented positive trial results."

- username "andybaron_ym" on an ARNA message board.

Avoid entering stop loss (market) orders to your broker on highly volatile, heavily manipulated stocks. It only telegraphs your intent to predator market makers who will steal your shares at much lower prices in a bear raid. Investors looking to protect their profits in DNDN got stopped out at much lower prices than their intended exit points. Entering a market order was a huge mistake.

This is a very long, but worthwhile read, full of intrigue, danger, greed, power, corruption, organized crime, and malice on Wall Street. Buyer beware.

http://www.deepcapture.com/michael-milken-60000-deaths-and-the-story-of-dendreon/

Jim Cramer likes ARNA as a speculative play

http://www.cnbc.com/id/15840232?play=1&video=1547554002

Normally, Jim Cramer's endorsement is the kiss of death, since I tend to be a contrarian. He has shunned ARNA before, so I was comfortable being long ARNA. Now that shares of ARNA have almost doubled since the July 1 announcement of the marketing partnership agreement with Eisai, Cramer is jumping on the bandwagon. In all fairness, I don't always disagree with Cramer's assessments; his recommendations are just badly timed, and viewers (largely retail investors) end up buying and selling at the exact inopportune times. His viewing audience on CNBC will perhaps drive shares up some more for the time being, as he has a large following. But be careful, because Cramer's rosy predictions have been known to set up retail investors for a disappointment, as short hedge funds could manipulate shares down after the run up. The smart (and sometimes crooked) money ends up slaughtering the dumb money.

However, with this knowledge, longs might be able to wait and buy the dip. The danger is if the horse has left the barn, and shares run up further on anticipation of positive outcomes at the Advisory Committee review September 16, and of course PDUFA review on October 22. It also provides shorts an opportunity, but I don't recommend retail investors short any stock, because the potential losses are limitless, and unless you're in the know, you will lose money even if you are correct on the direction of the price, but wrong on the timing. Wall Street will whipsaw you out of your position, leaving you with losses, despite being "right."

Overall, shares are ARNA are heavily manipulated, with a huge short interest of up to 27% of the float recently. Expect high volatility. Due to recent bullish news, there is heavy buying pressure, but naked shorts will manipulate the stock in order to cover their shorts and escape intact. If the outcomes are positive, shorts without an escape hatch will get torched.

I've been long ARNA for over a year, with an average entry point above $3, way below the current price per share of $5.26. I can afford to spectate while the share price gyrates, confident in Lorcaserin's FDA approval and commercial launch--that's why I'm long. My initial buy of $5 last year was untimely, but due to my bullish conviction for ARNA, I accumulated more shares on the way down to its lows. In other words, I doubled down, a risky proposition, but potentially highly rewarding. I won't deny there were some nervous moments, but in hindsight, my conviction enabled me to accumulate more shares at lower prices. I was able to overcome fear and doubt, and the price suppression ended up being a gift--everybody loves a sale. Sometimes courage and conviction are rewarded.

I'm long, locked and loaded. I'm not interested in trading in and out of this stock. For those that are, good luck to you.

See disclaimers in the side bar.

Disclosure: long shares of ARNA, short January ARNA put options.

Analyst upgrades on ARNA

http://notablecalls.blogspot.com/2010/07/arena-pharmaceuticals-nasdaqarna.html

See disclaimers on the side bar.

Disclosure: long ARNA shares, short January ARNA put options.

Lorcaserin on MSNBC

http://www.msnbc.msn.com/id/38248250/ns/health-diet_and_nutrition/

The smart money (early adopters, hedge funds) was in on ARNA below $3. Now that MSNBC is reporting on Lorcaserin, the big money (mutual funds, pension funds) will roll in while it crosses $5 (institutional buying threshold).

The learned crowd (retail investors who watch the news) will buy in at $25 after it's on NBC, probably after FDA approval. The masses will pile in at $50 when it's on Oprah.

Retail investors include the Hollywood socialite scene after FDA approval. There will be a buzz among celebrities, media reps, talent agents; the whole Hollywood ecosystem, with celebrity MD's getting supply to their top clients.

Just before Oprah validation, the gossip columnists will get a hold of the testimonials, and within a couple weeks, the housewife in Kansas will be demanding it from her family doctor.

That's how the media works when they grab a hold of something with traction.

Of course, this is contingent on FDA approval. The medical community will have legitimate concerns about off-labels and black markets (witness the shenanigans associated with HIV cocktails among body builders, for instance), but the safety profile for Lorcaserin is a HUGE advantage. Legitimate drugs can be misused and abused, so the studies ARNA did on addiction are also a positive. Just my opinion.

See disclaimers on the side bar. Any mention of direction and price targets is pure speculation and not a specific recommendation or prediction.

Disclosure: long ARNA shares, and short ARNA put options.

ARNA shares gain on VVUS' Qnexa rejection

http://www.businessweek.com/ap/financialnews/D9H09AV80.htm

As usual, some analysts really don't get it.

Separately, Barclay Capital analyst Dr. Jim Birchenough maintained a more conservative "Equal Weight" rating on Arena, saying the FDA seems to have a high hurdle for new obesity drugs and lorcaserin could face its own issues with regulators. Those issues could include adequacy of weight loss and heart valve risks.

According to the recently released New England Journal of Medicine article on Lorcaserin:

http://content.nejm.org/cgi/content/short/363/3/245

Serial echocardiography was used to identify patients in whom valvulopathy (as defined by the Food and Drug Administration) developed.

Among 2472 patients evaluated at 1 year and 1127 evaluated at 2 years, the rate of cardiac valvulopathy was not increased with the use of lorcaserin.

Pregnancy, VVUS and ARNA

This post came from an ARNA message board.

First of all there will never be any human pregnancy prospective studies done. All proven teratogens are known from retrospective studies or case control studies or studies done on animals. This is true of any drug brought to market.

To prove that an agent is a teratogen one might show:


•It is more often associated with individuals having a specific defect than with appropriately matched controls.
•A specific malformation or group of malformations is consistently associated with exposure to the teratogen.
•Biologic plausibility; the agent was present at the time in organogenesis when the anomaly would have to occur. As an example, it is unlikely that exposure to drug X in the third trimester would cause a cleft palate because the palate closes in the first trimester.
•The anomaly was less common before the presumptive teratogen was introduced. Phocomelia (missing upper parts of arms or legs), as an example, was almost nonexistent before the introduction of thalidomide.
•Experimental animals will develop the anomaly if given the presumed teratogen at the appropriate stage of organogenesis.

The BIG difference is that VVUS had a known teratogen!!!.
Using your logic no drug would ever be approved for lack of pregnancy studies.

Daniel
UCLA MD